Newstone Dev., LLC v. E. Pac., LLC

• Decision Date: 24 June 2016
• Docket Number: No. 2014–240–Appeal.,2014–240–Appeal.
• Citation: 140 A.3d 100
• Parties: NEWSTONE DEVELOPMENT, LLC v. EAST PACIFIC, LLC et al.
• Court: Rhode Island Supreme Court

140 A.3d 100

NEWSTONE DEVELOPMENT, LLC

v.EAST PACIFIC, LLC et al.

No. 2014–240–Appeal.

Supreme Court of Rhode Island.

June 24, 2016.

Michael T. Eskey, Esq., Stephen A. Izzi, Esq., Providence, for Plaintiff.

Donald J. Maroney, Esq., Providence, Paul T. Sullivan, Pro Hac Vice, Warren D. Hutchison, Esq., Michael Daly, Esq., Providence, for Defendants.

Present: SUTTELL, C.J., GOLDBERG, FLAHERTY, ROBINSON, and INDEGLIA, JJ.

OPINION

Chief Justice SUTTELL

, for the Court.

This case arises from an incident involving a frozen water pipe and its diluvial aftermath, which caused extensive property damage to several Newport waterfront luxury condominium units. The plaintiff, Newstone Development, LLC (Newstone), owned several units in the condominium complex at the time of the incident. Newstone now appeals from a Superior Court judgment in favor of the defendants, East Pacific, LLC (East Pacific), Michael Rabinowitz, Diane Rabinowitz (the Rabinowitzes), and the contractors, engineers, and architects who were involved in building the condominium (construction defendants).¹ The sole issue before this Court is whether the plaintiff can recover loss-of-use damages during the time that the condominium units were under repair. For the reasons set forth in this opinion, we affirm the judgment of the Superior Court.

IFacts and Procedural History

The essential facts in this case are not in dispute and are as follows. Newstone owned several condominium units at The Residences at Brown and Howard Wharf Condominiums in Newport (The Residences). East Pacific, an entity formed by the Rabinowitzes for the sole purpose of purchasing their condominium unit, owned unit 205 at The Residences. For a period of time prior to December 19, 2009, the Rabinowitzes had turned off the heat in unit 205. On December 19, 2009, water in a pipe passing through their unit froze, causing the pipe to rupture. The ensuing flood caused extensive damage to The Residences, including to common areas and to units within the building. Units 203, 204, and 206, all of which were owned by Newstone (the Newstone units), sustained a total of $1,600,000 in property damage. At the time of the incident, the Newstone units were unoccupied, and were listed and being marketed for sale. Newstone's insurance provider has since paid for all the necessary repairs to the Newstone units and the units have been sold at full market value.

On May 9, 2011, Newstone filed a four-count complaint against the Rabinowitzes and East Pacific. The complaint alleged counts of negligence (count 1), trespass (count 2), diminution of value of plaintiff's property (count 3), and strict liability (count 4). In its complaint, Newstone alleged that the “condominiums [at The Residences] were extensively damaged as a result of the flooding and water damage caused by * * * [d]efendants.” On August 8, 2012, Newstone filed a motion for leave to file an amended complaint, which the hearing justice granted. The amended complaint omitted counts 2 and 4, and alleged that Newstone suffered damages as a result of “not being able to use, occupy, rent or lease the Newstone [u]nits.” The complaint was amended again on February 20, 2013. The second amended complaint added construction defendants as additional defendants to the suit.²

On January 24, 2014, East Pacific and the Rabinowitzes filed a motion for summary judgment, to which plaintiff objected. A hearing was held on April 7, 2014. At the summary judgment hearing, plaintiff acknowledged that the Newstone units had sold and had not lost value; consequently, plaintiff informed the court that it would no longer be pressing its claim for diminution of property value. As to its negligence count, plaintiff sought to recover damages for the loss of use of the units as measured by the fair rental value for the period of time that the Newstone units were under repair. The plaintiff argued before the hearing justice that its damages during this period amounted to “loss of use [of the Newstone units,] [l]oss of the ability to rent the [Newstone units] or use the[m] * * * as its own * * *.” The hearing justice granted East Pacific and the Rabinowitzes' motion for summary judgment.³

The plaintiff subsequently filed a motion to reconsider. During the May 5, 2014, hearing on the motion to reconsider, the hearing justice explained that he had granted East Pacific and the Rabinowitzes' motion for summary judgment because “it was pretty much conceded that at the time of the loss that [the Newstone units] were not being offered for rentals.” The plaintiff argued for the first time during the hearing on the motion to reconsider that, irrespective of whether it had actually suffered a loss of use, it was entitled to recover for a “prospective loss of use.” The hearing justice disagreed and denied plaintiff's motion.

Following the denial of plaintiff's motion to reconsider, construction defendants filed their respective motions for summary judgment.⁴ A hearing on their motions was held on June 23, 2014. At the hearing, plaintiff raised the same argument that it had made during the motion to reconsider, i.e., that it was entitled to recover loss-of-use damages even in the absence of actual economic loss. The hearing justice granted construction defendants' motions for summary judgment reasoning that “awarding * * * [p]laintiff damages for loss of use,” where there was no actual loss of rent, “would result in * * * [p]laintiff profiting from this incident, something which the law should discourage.” Final judgment entered for all defendants and plaintiff filed a timely notice of appeal.

IIStandard of Review

“This Court will review the grant of a motion for summary judgment de novo, ‘employing the same standards and rules used by the hearing justice.’ ” Daniels v. Fluette, 64 A.3d 302, 304 (R.I.2013)

(quoting Great American E & S Insurance Co. v. End Zone Pub & Grill of Narragansett, Inc., 45 A.3d 571, 574 (R.I.2012) ). “We will affirm a [trial] court's decision only if, after reviewing the admissible evidence in the light most favorable to the nonmoving party, we conclude that no genuine issue of material fact exists and that the moving party is entitled to judgment as a matter of law.” Id. (quoting Great American E & S Insurance Co., 45 A.3d at 574 ). Furthermore, “the nonmoving party bears the burden of proving by competent evidence the existence of a disputed issue of material fact and cannot rest upon mere allegations or denials in the pleadings, mere conclusions or mere legal opinions.” Id. (quoting Great American E & S Insurance Co., 45 A.3d at 574 ). It is well settled that “issues of negligence are ordinarily not susceptible of summary adjudication, but should be resolved by trial in the ordinary manner.” Holley v. Argonaut Holdings, Inc., 968 A.2d 271, 274 (R.I.2009) (quoting Gliottone v. Ethier, 870 A.2d 1022, 1028 (R.I.2005) ). However, “summary judgment should enter ‘against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case * * *.’ ” Lavoie v. North East Knitting, Inc., 918 A.2d 225, 228 (R.I.2007) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ).

IIIDiscussion

On appeal, plaintiff acknowledges the absence of actual economic loss, but “maintain[s] that it [is] nonetheless entitled to damages from [defendants] for their tortious invasion and deprivation of its right to use its units during the repair period.” The plaintiff argues that §§ 929

and 931 of the Restatement (Second) Torts (1979) (the Restatement) provide for damages for the loss of use of the property—measured by the property's fair rental value during the repair period—where real estate is tortiously damaged, “even where the owner in fact suffers no harm by the deprivation.” (Emphasis omitted.) The plaintiff contends that, “in property loss cases, proof of actual economic loss is not an essential element for recovery of loss[-]of[-]use damages,” and, consequently, that the decision of the Superior Court should be reversed.

In response, defendants argue that plaintiff has failed to present any evidence to support a finding that plaintiff actually lost the use of the Newstone units, “let alone that it sustained any injury related to the alleged loss of use.” The defendants argue that, even if plaintiff had presented evidence that it lost use of the Newstone units, plaintiff nonetheless waived any argument that §§ 929

and 931 of the Restatement do not require proof of actual damages to recover for loss of use because plaintiff presented this argument for the first time during the hearing on the motion to reconsider. Additionally, defendants maintain that, even if the argument were properly before this Court, “[o]nce [plaintiff] concede[d] that it [had] not sustain[ed] any economic loss * * *, [its] claim failed as a matter of law.” Contrary to plaintiff's contentions, defendants insist that an actual injury must be proven to recover any consequential damages related to the loss of use of the Newstone units.

“It is well settled that to prevail on a claim of negligence a plaintiff must establish a legally cognizable duty owed by a defendant to a plaintiff, a breach of that duty, proximate causation between the conduct and the resulting injury, and [an] actual loss or damage.” Nationwide Property & Casualty Insurance Co. v. D.F. Pepper Construction, Inc., 59 A.3d 106, 110 (R.I.2013)

(quoting Habershaw v. Michaels Stores, Inc., 42 A.3d 1273, 1276 (R.I.2012) ). Generally, when the damage to property is temporary, the cost of repair is the proper measure of damages. Banville v. Brennan, 84 A.3d 424, 432 (R.I.2014). However, in certain circumstances involving an encroachment upon land, damages “may include the difference in value of the land before and after the harm as well as damages for the loss of use of the land.” Id. at 433 (citing Restatement (Second) Torts § 929 (1979) ). Section 929(1)(b) of the...